Delivering his policy address at the Legislative Council, Tung said the advent of globalization, the move towards a knowledge-based economy and the rapid rise in the competitiveness of Hong Kong's neighbors have posed obvious challenges to Hong Kong's traditional advantages and position.

"The rapid growth of our economy in the past two decades has been due mainly to our seizing the opportunities provided by the opening-up of the mainland," Tung said, adding that the relocation of Hong Kong's manufacturing sector across the boundary enabled its successful transformation into a service-oriented economy.

Tung said that a significant change in the world economy occurred, marked by globalization and the rise of the knowledge-based economy.

These have led to a re-definition of productivity and changed the rules of economic competition, he said.

"Whoever possesses an optimized economic structure and a workforce superior in technological know-how would be more able to seize the initiative in the New Economy," Tung noted.

As a small open economy, Tung pointed out, Hong Kong owed its past economic miracles to a number of inherent institutional factors and a hardworking, persevering and enterprising population.

"But we cannot discount special circumstances and other external factors," he said. "Now the task of restructuring our economy has been complicated by the emerging economies around us."

(Xinhua News Agency January 8, 2003)